Sri Lanka: The Politics Of Adani’s Power Project – Analysis

The controversy reveals the intersection of factors like Sri Lanka’s dire needs, its indebtedness to India, New Delhi’s geopolitical agenda, and pressure from anti-Indian Sri Lankan nationalists.

The controversy over Adani’s US$ 500 million renewable energy project in North Sri Lanka, which is now threatening to disturb the recently-forged good relations between Sri Lanka and India, is the result of an intersection of a variety of factors.

These are: Sri Lanka’s utter dependence on India for basics like food, fuel and fertilizer; Colombo’s moral obligation to reciprocate New Delhi’s generosity by accommodating the latter’s economic and geopolitical interests;  and last but not the least, the issues raised by Sri Lankan nationalists, a powerful force, which is primarily based on an ingrained fear of Indian hegemony.

By the end of 2021, Sri Lanka had found itself in an abyss due to the economic losses inflicted by a badly managed COVID-containment program, a number of bad economic decisions and an inherited tendency to be imprudent in spending. When these policies resulted in unprecedented shortages in forex, food, fuel, fertilizer and medicines, and prices skyrocketed, it was only India which rushed aid in both money and kind. Other nations, including China, looked on passively.

While China flatly refused to restructure the debt repayment regime, refused to revise terms of lending, and asked Colombo to be prudent in its management of finances, the Western nations said that they would wait for the IMF to finalize its recovery scheme for Sri Lanka. India too did not enter the fray thoughtlessly. It made Sri Lanka sign on the dotted line on some pacts relating to Indian Ocean security before announcing its largesse, which now is now worth over US$ 3.5 billion.

One of India’s expectations was that the renewable energy projects in Mannar and Ponneryn in North Sri Lanka, located close to Tamil Nadu, would be given to the Adanis. The Adani project envisages an investment of US$ 500 million. India considers the Tamil-dominated North Sri Lanka, only 36 km away from its shores, as being strategically important for it, in view of China’s attempts to make economic inroads into it. Earlier, Sri Lanka was persuaded to cancel a Chinese project to set up small power plants in the islands of Nainativu, Delft or Neduntivu, and Analaitivu, located in the Palk Bay, and give it to India instead.    

However, the forex, food and fuel crisis, and India’s timely and generous help to face it, cleared the path for a favorable decision on the Adanis’ projects. Sri Lanka desperately needed power because at one stage 13-hour power cuts had to be imposed due to a shortage of fuel for the power plants. The Lankan government rushed the approvals for the project circumventing the tendering process on grounds of necessity. Both President Gotabaya Rajapaksa and Prime Minister Ranil Wickremesinghe backed the project to the hilt as both were keen on retaining India’s goodwill after China turned a cold shoulder to pleas for financial aid.

However, the entry of the controversial Adanis, coupled with the circumvention of the tender procedure, raised the hackles of Sri Lanka’s main opposition party, the Samagi Jana Balawegaya (SJB), and the radical Sinhala nationalist National Freedom Front (NFF). Opponents of the Adanis were further incensed when the government used its majority in parliament to amend the Electricity Act to waive the tender procedure for such key projects. SJB leaders said that they are grateful to Indian Prime Minister Narendra Modi for the help has been giving to Sri Lanka, but they are opposed to his bringing in his controversial friend Adani through the backdoor.

The issue was further complicated by the fact that the Chairman of the Ceylon Electricity Board M.M.C.Fernando told the parliamentary Committee on Public Enterprises (COPE) that President Gotabaya Rajapaksa had told him that the deal had to be accepted because Indian Prime Minister Modi was putting pressure on him. Alarmed at Fernando’s statement, the President vehemently denied it and admitted only to saying that it was hard to get tenders for such big projects. Given the President’s denial, Fernando retracted his statement and resigned from his post.  

Some like columnist Tudor Wijenayke think that the government should  not have changed the law but made the Adani project a government to government one with the Adanis named by the Indian government as the executer of the project.

The Ceylon Electricity Board Engineers’ Union raised the issue of pricing of the power to be supplied by the Adanis’ plant. Though the government has said that it is yet to fix the price, it is said that it will be US 7.55 cents per kWh unit, while local producers are paid only the equivalent of US 5 cents. Morever, the Adanis will have to be paid in USD.

Opponents of the Adani project announced a plan to demonstrate against the deal on June 16 with the idea of making it part of the on-going anti-government campaign which began more than two months ago as the “Go Home Gota” movement.

Meanwhile, Sri Lankan nationalists (essentially anti-India and anti-US) have jumped into the fray. National Freedom Front (NFF) leader and MP Wimal Weerawansa said that the growing Indian role in Sri Lanka  should be examined against the backdrop of the IMF’s deliberately delaying much needed assistance. He also stated that Sri Lanka should not solely depend on India. He further said that foreign powers may find developments here conducive for their overall plans. The QUAD and the West may use the “Right to Protect” policy to launch a military operation against Sri Lanka.

Political observers said that the opposition groups, including some allies of the ruling party, are raising issues to embarrass the government and  build up their own respective constituencies. The opposition SJB in picking holes in every act of the government. And the Sinhala or Sri Lankan nationalists are looking for opportunities to build up their anti-Indian and anti-West constituencies.

A Lankan official who did not want to be named said that perhaps the Adani deal was ill-timed. Coming soon after Indian aid started flowing, the deal gave the impression that the aid was primarily meant to secure New Delhi’s economic, political and strategic goals.

Reacting to the happening in Sri Lanka, the Adani Group said that it was “disappointed” but remained confident that the deal is secure. In a statement quoted by the Indian media, the group said: ” Our intent in investing in Sri Lanka is to address the needs of a valued neighbor. As a responsible corporate, we see this as a necessary part of the partnership that our two nations have always shared. We are clearly disappointed by the detraction that seems to have come about. The fact is that the issue has already been addressed by and within the Sri Lankan Government.”

The assessment here in Colombo is that Sri Lanka will go through the deal, opposition or no opposition, because it has no option.

(This article previously appeared in Counterpoint dated June 16, 2022)